Capital takes out top spot in Asia Pacific in international property investor survey
| 24 June 2018
Lack of premium office space and soft yields drives interest in Wellington
Wellington has come out on top in Asia Pacific in an international survey that looks at a city’s appeal as a commercial property investment destination.
The quarterly investor and occupier sentiment survey by the Royal Institute of Chartered Surveyors’ (RICS) covers more than 30 countries globally and provides an accurate leading indicator of metrics such as investment volumes, rents, and capital values.
In the latest update Wellington is seen as the best investment destination in the Asia Pacific region for investor and occupier sentiment, second best for rental and capital expectations, and among the best in the world overall.
The findings support market behaviour over the past 12 months, with real estate services company CBRE being involved in the sale of four Wellington buildings worth more than $50 million, including Kiwi Property Group’s Majestic Centre to South African finance company Investec for $123 million.
CBRE senior analyst Richard Carr said much of it can be put down to the lack of available quality office space in Wellington as part of the ongoing impacts of the 2016 earthquake centred near Kaikoura.
“As a result of the stock reduction, we’ve been seeing tenants paying higher rates to secure high-quality resilient space in the market. This occupier demand has led to increases in the infrastructure spend and capital maintenance programmes of buildings, which wouldn’t have been done otherwise. We would have just slowly degraded our capital over time.
“Investors are responding positively to the current and forecasted low vacancy rate in the prime market. Paired with that, there is also countercyclical rental growth compared to the rest of New Zealand and Australasia, so again it presents Wellington in a better light than people give it credit for."
CBRE figures show Wellington’s rime CBD office space of almost 370,000 square metres had a vacancy rate of just 0.7 percent in the March quarter compared to 1 million square metres of secondary CBD office space that had a vacancy rate of 9.9 percent.
That compares to a 6.6 percent vacancy for prime CBD office space in Auckland and 11 percent for secondary office space in the country’s biggest city.
The RICS report also showed 80 percent of survey respondents perceived values in Wellington as being fair, second only to Perth. This contrasts with 73% of respondents in Auckland who viewed the market as being expensive vs 5% who thought it was cheap.
The survey also notes New Zealand remains attractive to overseas investors due to its higher initial yields compared to other markets and relative ease of doing business. For offshore institutions the key focus being on CBD offices, but recent months have seen stronger enquiries for industrial and logistics properties, in line with this sector as an investible asset class.
Carr says prime and secondary warehouses with long leases and good covenants hold strong appeal at present and strong performing retail is also not going unnoticed with an Australian private purchaser acquiring North City shopping centre in Porirua in April for $100 million.
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ABOUT CBRE GROUP, INC.
CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2017 revenue). The company has more than 80,000 employees (excluding affiliates), and serves real estate investors and occupiers through approximately 450 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com..